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Index IDEA: UK advisors & smart beta; more to do

February 6, 2018

According to a recent FTSE Russell survey, UK financial advisors are aware of smart beta index-based strategies and are increasing their use, yet remain somewhat skeptical of their benefits and are looking for a greater understanding.

The 2018 FTSE Russell smart beta advisor survey expanded on the global index provider’s 2015 US advisor smart beta survey with input from 256 full-time, fee-based financial advisors and wealth managers divided almost equally between the US, UK and Canada, with 83 of those advisors based in the UK.

Survey findings showed that, among UK financial advisors, more than seven in ten (72%) are “aware” of smart beta, yet in this same group just one in three (34%) are “very familiar” with smart beta approaches.

And while more than half of UK advisors surveyed (52%) expect their use of smart beta strategies to increase in the next year or two, survey responses indicate a need for more information on smart beta. Specifically, among UK advisors who do not use smart beta strategies, top reasons cited were “not possible to predict whether these strategies will outperform conventional active or passive funds” (35%); “not a long enough track record” (32%); “you can achieve smart beta objectives with your own portfolio management”; and “don't feel that back testing shows these strategies offer enough” (26% each).

“Our survey findings reinforce the fact that we have seen very strong and growing interest in smart beta strategies among UK-based financial advisors, but we clearly have further to go. We continue to see a need among our clients for more education, information and insight around the value of smart beta strategies and how they may play a role in client portfolios.”

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Views expressed by Andre Voinea are as of February 5 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

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